Smartphones are a necessity for many people, but purchasing one outright can be costly. As of 2020, the average cost for premium smartphone models topped $1,000, though the global average smartphone selling price in 2021 is only $363.

Financing the purchase of a smartphone may seem like the better option when cash is tight, and it is available through retailers, cellphone companies, cellphone manufacturers, and buy now, pay later (BNPL) platforms. Understanding how the various financing options work for purchasing a smartphone can help with deciding whether it’s worth it.

What Is Smartphone Financing?

Generally speaking, smartphone financing allows you to make payments over time. You choose the phone that you would like to purchase and apply for financing. If you’re approved, you may have to make a small initial down payment, then pay off the remaining balance in installments. With some types of smartphone financing, no down payment is required. With others, you may have a revolving line of credit.

Financing terms can vary based on where you’re purchasing the phone and how much you’re paying for it. For example, you may have to repay the balance over 24 or 48 months. Smartphone financing can be advertised as 0% interest when paid in full within a specified number of months. However, that doesn’t mean that financing a smartphone is interest free. If you’re taking advantage of a 0% financing offer, then it may be a deferred-interest promotion in disguise. If you fail to pay the balance in full before the end of the promotional period, then interest charges may be applied retroactively to the initial purchase amount.

A credit check may be required to qualify for smartphone financing, and there may be other qualifications that you need to meet to be eligible for a smartphone payment installment plan.

Types of Smartphone Financing

Smartphone financing can take different forms, depending on the provider. That’s important to know for comparing financing terms. Here’s an overview of the different ways that you can finance the purchase of a smartphone.

Retail smartphone financing

The first option for financing a smartphone is through a retail store. Best Buy, for example, offers 24-month financing on unlocked phones and Geek Squad purchases above a certain amount. To use this type of financing, you need to have a Best Buy credit card. No interest applies if the balance is paid in full within 24 months of sale. Purchases made with a Best Buy credit card can also earn rewards.

Financing a smartphone through a retailer may require a hard credit check if you’re opening a store credit card, which could cause a temporary drop in your credit score. While retailer cards can offer promotional financing, it’s important to keep in mind that the regular variable annual percentage rate (APR) for purchases may be substantially higher than what you would pay with a traditional credit card.

Cellphone company smartphone financing

The next possibility for financing a smartphone is to go through your cellphone service provider. Verizon, for example, allows eligible customers to pay off devices in installments with no interest and no finance charges. You will need a two-year contract to take advantage of this benefit, and an upgrade fee also applies.

If you have no plans to change cellphone companies in the near term, then financing a new phone this way could make sense. With Verizon, for example, you can take 24 months to pay off your device in installments. The catch, of course, is that you’re locked into a new contract. If you decide to switch cellphone companies, you could trigger a fee if it means breaking your contract.

Cellphone manufacturer financing

Depending on the type of phone in which you’re interested, you may be able to get financing through the manufacturer. Both Samsung and Apple, for instance, offer promotional financing for customers who want to purchase new smartphones and pay for them over time. With Samsung, you have to apply for a financing account; with Apple, you need to have an Apple Card.

The advantage of these types of financing is that you can use them to purchase more than just smartphones. Samsung Financing can be used to purchase TVs or appliances, while you can use the Apple Card to buy AirPods, an Apple Watch, iPads, or a Mac. If you’re loyal to either of those brands, you may prefer this type of financing, but you should pay attention to the interest rate and fees.

Buy now, pay later (BNPL) financing

BNPL represents a growing trend in short-term financing. Also referred to as point-of-sale installment loans, BNPL platforms let you make purchases with a small down payment, then pay them off in four or more installments. Affirm, for example, lets you finance smartphones with Visible over 24 months.

BNPL financing may save you money, as some of these services don’t charge any interest or fees at all. However, not every cellphone company works with BNPL platforms, so that may limit where you’re able to use it. And one criticism of BNPL financing is that it can lead to a cycle of debt if you have multiple payment installment plans.

The Bottom Line

Smartphone financing could make sense if you don’t have the cash to purchase a new phone out of pocket. When comparing smartphone-financing options, it’s important to check the terms carefully, so you know exactly how much you’re spending and when interest may accrue.

Also, consider the possibility of using a rewards credit card with a 0% promotional APR on purchases to finance a new phone instead. This way, you’re not locked into a set installment agreement, and you can earn some rewards on your phone purchase in the process. Some rewards cards also offer built-in cellphone insurance protection as an added benefit.